Until now, Financial Advisory Firms (EAF’s) did not contribute to the Investment Guarantee Fund (FOGAIN), which is logical since there is no possibility of fraud as these companies are only advisors and therefore do not touch money. Securities Agencies that only advised, i.e. did not manage, were obliged to join the FOGAIN for a minimum annual amount of 20,000 euros, which was quite unfair and absurd.
However, by means of the new Royal Decree this changes substantially since all investment services companies are subject to the FOGAIN, including therefore the EAF’s.
Article 3(1) now reads as follows:
“1. The entities adhering to the Investment Guarantee Fund shall be the national investment services firms and financial advisory firms referred to in Article 188.1 of the Securities Markets and Investment Services Act.”
Article 8, paragraphs 2, 3, 4 and 7 shall read as follows:
“2. The adhering entities shall make an annual contribution equivalent to the sum of the following amounts:
(a) A fixed amount depending on the list of investment services and activities they perform, according to the following breakdown:
(i) Portfolio management: 2,700 euros.
ii) Trading on own account: 2,700 euros.
iii) Receipt and transmission of client orders (including the placement of financial instruments without a firm commitment): 1,000 euros.
iv) Investment advice: 800 euros.
(v) Other investment services: 2,700 euros.
vi) Ancillary custody and administration services on behalf of clients: 2,700 euros.
b) 2 per thousand of the cash, with a limit of 100,000 euros per covered client, and 0.08 per thousand of the cash value of the securities and financial instruments deposited or managed therein, corresponding to clients covered by the guarantee.
This modification seeks a greater degree of linkage between the contribution of each institution to the Fund and the risk that this could entail for the system as a whole. Likewise, in the search for stability in the sector, two additional modifications are introduced: firstly, a formula is introduced to determine the volume of assets from which the progressive reduction of the contributions to be made by the member entities will take place, and secondly, an adjustment is made to the formula used for calculating the assets which will trigger the suspension of certain contributions. Likewise, and with the aim of facilitating an adequate application of these modifications, a voluntary and progressive regime of adaptation of the entities to the new legal regime of contributions is introduced.
This rationality of the new Decree means that a Securities Agency that only provided advice and previously had to contribute €20,000 per year will now only contribute €800 per year.
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